That backdrop is unlikely to change very much soon. As we go to press all eyes are on the Fed and whether it will raise rates this week. But as I've written before, even if it pulls the trigger now it is unlikely to mark the start of a rapid upward ascent for interest rates - the days of easy income are still a distant prospect, and in the meantime finding safe, high-yielding investments gets ever tougher.
The government's recent pension reforms have also left those approaching retirement and looking for income with more to think about, but little in the way of support to help them tackle these complex decisions. It's good that retirees now have wider choices, but an hour or two's consultation hardly seems adequate preparation for the balancing act of making sure you have enough to live on for as long as you live. We've explored income from every conceivable angle in the IC over the years, but are still far from having definitive answers - partly because every individual situation requires its own approach, and because rules and markets change. Shunning annuities is not a business to be taken lightly, either, because, the risk in drawdown is that the pot dries up too quickly, or the investments you select stop delivering the income you need. Off-the-shelf drawdown products might help you mitigate some of this risk, but you'll pay handsomely for them - charges that can be ill-afforded when expected returns are shrinking.
Even if you're still in growth mode, it's worth preparing for when the times for you need to start drawing an income. That's partly because you’ll need to think about how the shape of your portfolio changes as you age, but also because it is so-called income shares, and reinvested dividends from them, that are also likely to deliver the bulk of returns over time. Growth investors should also be on the lookout for shares that have the potential to be the dividend payers of tomorrow, rather than those that simply promise the earth.
That's something we may be able to help you with at our next seminar in October, and also at the London Investor show in late October. We'll be running an entire day's worth of seminars there focused mainly on the fundamental analysis we pour into our sectors and companies coverage, and if you use the voucher code 'IC' when you register at www.londoninvestorshow.co.uk you can get in for free. We hope to meet you there.
